A U.S. appeals court ruled that New Jersey cannot stop Kalshi from offering sports-related event contracts in the state, holding that those markets fall under federal law through the Commodity Exchange Act and the oversight of the Commodity Futures Trading Commission (CFTC).
In a 2-1 decision, the 3rd U.S. Circuit Court of Appeals in Philadelphia said trading on Kalshi’s designated contract market is governed by federal derivatives rules rather than state gambling law. The decision blocks New Jersey regulators from enforcing their cease-and-desist order against the company. Kalshi has argued for years that its products are swaps and hedging tools, not conventional sports bets, and the appellate ruling largely accepted that position.
Federal preemption defeats New Jersey’s enforcement effort
The dispute began after New Jersey sent Kalshi a series of cease-and-desist letters in 2025, alleging that the company’s sports markets violated the state’s Sports Wagering Act and constitution. State authorities also threatened penalties of up to $100,000 per violation. Kalshi responded by suing in federal court, saying its event contracts are a type of swap regulated under the Commodity Exchange Act and therefore sit within federal jurisdiction.
Before the appeal, a federal judge in New Jersey had already granted Kalshi a preliminary injunction in 2025, writing that he was persuaded the company’s sports-related event contracts fell within the CFTC’s exclusive authority. The 3rd Circuit has now reinforced that view, giving Kalshi a major legal win in one of the most closely watched fights over prediction-market oversight in the U.S.
Broader battle with states is still active
The ruling reaches beyond New Jersey. Kalshi is also fighting regulators in Nevada, Maryland, and Tennessee over the same basic question: are these markets illegal gambling, or federally protected derivatives? In Tennessee, U.S. District Judge Aleta Trauger recently granted a temporary restraining order that paused enforcement of the state’s cease-and-desist action, finding Kalshi is likely to succeed in arguing that federal law overrides state gambling statutes.
The conflict has also expanded at the federal level. The CFTC and the U.S. Department of Justice have sued Arizona, Connecticut, and Illinois over state actions tied to prediction markets. CFTC Chair Mike Selig described those efforts as “aggressive and overzealous attempts” to overstep the agency’s authority. Courts are now being asked to draw a sharper line between state gambling enforcement and federal control of event-based trading.
Kalshi calls the ruling significant, but the policy fight remains open
After the New Jersey decision, Kalshi co-founder and CEO Tarek Mansour called the ruling a “significant victory.” He said regulated prediction markets offer greater transparency and fairness than traditional betting channels that are less transparent. In earlier remarks, Mansour framed prediction markets as information infrastructure rather than casinos, saying they produce “clean, crowd-driven probabilities” instead of “noisy headlines.”
Even with the appellate win, Kalshi’s legal exposure has not disappeared. A judge in Nevada recently extended a ban that prevents the company from offering event contracts there, showing how uneven the legal picture remains across states. At the same time, a bipartisan group of U.S. senators has floated legislation that would ban sports-bet and casino-style contracts on CFTC-regulated prediction markets altogether. That leaves the final boundary of the business unsettled, with both courts and Congress still in the fight.